Africa’s youthful middle class helping continent avoid past pitfalls

By David Smith / The Guardian, LONDON

It has been described as the new scramble for Africa. The continent has awoken from the nightmare of its mid-1990s civil wars. Coups and dictators appear to be going out of fashion. Now, with six of the world’s 10 fastest-growing economies, there is a growing consensus that Africa’s time has come.

Africa’s GDP growth will average 5 percent in the coming decade, according to Ernst & Young, with Ghana, Ethiopia and Uganda set to top 7 percent a year. Foreign direct investment, which has risen six-fold in the past decade, is forecast to reach US$150 billion by 2015.

There is growing confidence in Africa as an investment destination, with the highest returns in the world. In the World Bank’s most recent Ease of Doing Business rankings, 14 African countries ranked ahead of Russia, 16 ahead of Brazil and 17 ahead of India.

However, with expectation comes the potential for disappointment. The question now is, can Africa build on the opportunity and avoid the pitfalls of the past?

Some are in no doubt that the continent is in better shape this time.

This month, former British prime minister Tony Blair, who once described Africa as a “scar on the conscience of the world,” told businessmen in London: “There is no doubt: Africa is changing for the better. The perceptions of Africa are also changing for the better. There is a new sense of hope and confidence, an optimism and an expectation that is based on evidence, not dreams.”

“Above all, I am noticing in my frequent visits there that there is a new generation of leaders in politics, business and civic society who don’t simply have a new competence about how they approach their tasks, but a new attitude, a new frame of thinking, a new way of looking at their own situation,” Blair said.

Whereas in the past these opportunities may have been squandered, or canceled out by a global financial crisis, it now appears that Africa is better positioned to withstand shocks. During the meltdown of 2009, while developed Western economies were shrinking at an average of 2 percent, sub-Saharan Africa was still growing at about 3.5 percent.

Mthuli Ncube, chief economist at the African Development Bank, gave three reasons: “First, the growing domestic demand in Africa itself, the rise of a middle class, acted as a shock absorber. Second, there was improved macroeconomic management from a generation of managers who trained during the restructuring programs of the early ’90s.”

“Third, African economies have diversified: Nigeria is now not only oil, but also tourism and agriculture. Diversification is very helpful when there is a decline in commodity prices,” Ncube said.

The bank estimates the middle class at 313 million people in 2010, 34 percent of the continent’s population, and predicts it will grow to 1.1 billion (42 percent) by 2060. There are now more than 100,000 Africans with at least US$1 million to invest, according to the consultants Merrill Lynch and Capgemini. A mobile phone revolution is sweeping the continent.

Blair said the growing influence of China was another reason for optimism. Three years ago it overtook the US as Africa’s biggest trading partner. China, which has a thirst for Africa’s natural resources, says bilateral trade grew from US$10.6 billion in 2000 to US$160 billion; last year and investment totaled US$13 billion.